In traditional approaches to asset management, assets are typically held by entities in a custodial manner. This creates a risk to the buyer, as the buyer's assets are subject to any errors or improprieties by the entities in custody of the assets, such as fraud, forged data, deleted data, and so forth. An enormous legal and regulatory structure exists to prevent, detect, and dissuade such errors by setting forth processes and rules for record keeping of company data, such as documents, emails, transactions, contracts, etc., and setting forth specific disclosure and fiduciary requirements.
Financial institutions are also subject to frequent audits designed to ensure those records and processes accurately represent the firm's assets, liabilities, and operations. Despite the frequent audits and the legal and regulatory structure that exists, fraud and insolvency cases occur across the entire landscape of asset management with surprising regularity. The continual failure to prevent these issues highlights the risks inherent in using third parties to manage assets. Current technologies similarly fail to prevent these issues.